A Mixed First Half for Worldwide Publishing

E-book sales continued to grow, but different factors weakened earnings

By Jim Milliot
|

Sep 07, 2012

E-book sales accounted for roughly 20% of worldwide revenue in the first half of 2012 at four of the five large publishers that reported six-month results in recent weeks. The lone exception was Lagardère Publishing, which has the most extensive holdings in overseas markets, where e-books are just beginning to make an impact. In its U.S. division, Hachette Book Group, digital sales rose 20% in the first half of the year and accounted for 27% of total revenue, up from 22% in the first half of 2011. Random House reported the strongest growth in all areas in the first six months, with sales of the Fifty Shades trilogy driving large gains in total sales, profits, and e-book sales. E-book sales rose 89.1% in the first half of the year in Random’s worldwide operations, to about 208 million euros, and e-books represented 22% of Random’s worldwide sales and 27% of sales in the U.S.

Despite e-books representing only 8.4% of worldwide revenue at the midpoint of 2012 at Lagardère, e-book sales still rose 68.9% in the period, the second fastest growth rate among the five houses. E-book sales at Simon & Schuster rose 51% in the first half of the year, to about $77 million, while e-book sales at Harlequin increased 34.4%. Penguin’s e-book sales increased 31.2% in the period.

Operating margins rose only at Random House and Harlequin in the first half of 2012, but earnings at two publishers—Simon & Schuster and Lagardère—were negatively affected by litigation expenses and settlement costs associated with the various price-fixing lawsuits brought over e-books. S&S noted that without those charges, its earnings would have been substantially better. And while the success of Fifty Shades drove Random to record results, other publishers cited the incredible sales pace of the trilogy as siphoning off possible sales for their own titles. Penguin Group USA CEO David Shanks’s contention that publishing is becoming even more hits driven appears to be borne out by the performances of the five houses, with Random the clear winner so far this year, while Hachette Book Group, riding high not that long ago with the Twilight saga, has struggled to improve sales, especially in the U.S. But Lagardère hopes to turn things around in the second half of the year as it releases what could be the big book of the fall, J.K. Rowling’s The Casual Vacancy. Led by the title, with a two-million copy first printing, Lagardère said it expects the second half of 2012 to show improvement over the January–June period.

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